United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] Quarterly Report Pursuant to Section 13 of the Securities Exchange Act of
1934 for the Period of Nine Months Ended September 30, 1999
[ ] Transition Report Pursuant to Section 13 of the Securities Exchange Act of
1934 for the Transition Period from to
Commission file number: 2 - 85175W
ELECTRO-KINETIC SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1954716
(State) (I.R.S. Employer Identification No.)
270 Rocky Run Road, Glen Gardner, New Jersey 08826
- -------------------------------------------- -----
(Address of principal executive offices) (Zip code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X No _
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common Stock, No Par Value. As of September 30, 1999, issued 20,936,069 shares
and to be issued 9,230,000 shares.
<PAGE>
INDEX
PART I. FINANCIAL STATEMENTS
Item 1. Financial Statements
Pages
Consolidated Balance Sheets as of September 30, 1999 (Unaudited)
and December 31, 1998
Assets F-1
Liabilities and Stockholders' Equity (Deficiency) F-2
Consolidated Statements of Operations for the Three Months and Nine Months Ended
September 30, 1999 and 1998 (Unaudited) F-3
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1999 and 1998 (Unaudited) F-4
Consolidated Statements of Changes in Stockholders' Equity for the Nine Months
Ended September 30, 1999 (Unaudited) and the Year
Ended December 31, 1998 F-5
Notes to Consolidated Financial Statements (Unaudited) F-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations F-7
PART II. OTHER INFORMATION
Signatures
<PAGE>
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
ASSETS
9/30/99 12/31/98
(UNAUDITED)
Current assets:
Cash $ 2,110 $ 4,065
Miscellaneous receivable and
other assets - 25,000
-- ------
Total current assets 2,110 29,065
------ ------
Total assets $ 2,110 $ 29,065
======== ========
See accompanying notes to Consolidated Financial Statements
F-1
<PAGE>
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
9/30/99 12/31/98
(UNAUDITED)
Current liabilities:
Accounts payable $ 5,483 $ 44,333
Accrued expenses 16,227 19,793
Notes payable 35,828 35,828
Due to officers 52,483 76,183
Deferred income - 20,000
------- ------
Total current liabilities 110,021 196,137
Liabilities being settled for stock 10,713 -
------- -------
Total liabilities 120,734 196,137
-------- -------
Commitments and Contingencies
Stockholders' equity (deficiency):
Class "A" common shares, no par value;
authorized - 90,000,000 shares; issued
and to be issued - 30,166,069 in 1999
and in 1998 3,441,308 3,441,308
Additional paid-in-capital 52,293 52,293
Accumulated deficit (3,612,225) (3,660,673)
----------- -----------
Total stockholders' equity
(deficiency) (118,624) (167,072)
--------- ---------
Total liabilities and stockholders'
equity (deficiency) $ 2,110 $ 29,065
======== ========
See accompanying notes to Consolidated Financial Statements
F-2
<PAGE>
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
Three Months Ended September 30, Nine Months Ended September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Selling, general and
administrative expenses $ (1,195) $ 1,363 $ 10,752 $ 5,463
--------- -------- --------- -------
Other income (expenses)
Expense reimbursements 20,000 20,000
Interest expense - (2,350) - (4,600)
Impairment in investments in subsidiaries
and affiliates - (98,903) - (111,868)
Total other income (expenses) 20,000 (101,253) 20,000 (116,468)
------- --------- ------- ---------
Income (Loss) before extraordinary income 21,195 (102,616) 9,248 (121,931)
Extraordinary income - cancellation of
indebtedness - - 39,200 -
Net income (loss) for the period $ 21,195 $ (102,616) $ 48,448 $ (121,931)
========= =========== ========= ===========
Income (loss) per share
(basic and diluted) $ .001 $ (.003) $ .002 $ (.004)
====== ======== ====== ========
Weighted average number of
common shares outstanding 30,166,069 30,166,069 30,166,069 30,166,069
=========== =========== =========== ==========
</TABLE>
See accompanying notes to Consolidated Financial Statements
F-3
<PAGE>
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
1999 1998
Cash flows from operating activities:
Net income (Loss) $ 48,448 (121,931)
--------- ---------
Adjustments to reconcile net loss to net
cash used in operating activities:
Impairment in investments and affiliates - 111,868
Change in assets:
Accounts receivable decrease 25,000 -
Increase (decrease) in liabilities:
Accounts payable (28,137) 1,211
Accrued expenses (3,566) 1,400
Due to officers (23,700) 5,134
Deferred income (20,000) -
-------- -------
Total adjustments (50,403) 119,613
-------- -------
Net cash used in operating activities (1,955) (2,318)
-------- -------
Cash flows from financing activities:
Notes payable - 1,300
-------- -------
Net increase (decrease) in cash (1,955) (1,018)
Cash - beginning of the year 4,065 1,505
------ -----
Cash - end of the period $ 2,110 487
======== ===
See accompanying notes to Consolidated Financial Statements
F-4
<PAGE>
ELECTRO-KINETIC SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) AND FOR THE YEAR
ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C>
Additional Accumulated
Common Shares Common Share $ Paid In Capital Deficit Total
------------- -------------- - ---------------- - -------- -----
Balance at January 1, 1998 30,166,069 $ 3,441,308 52,293 (3,552,913) (59,312)
Net loss for 1998 - - - (107,760) (107,760)
------------ -------- -------- --------- ---------
Balance at December 31, 1998 30,166,069 3,441,308 52,293 (3,660,673) (167,072)
Net income for period
ended September 30, 1999 - - - 48,448 48,448
------------ -------- -------- --------- --------
Balance at September 30, 1999
(Unaudited) 30,166,069 $ 3,441,308 52,293 (3,612,225) (118,624)
============ ============ ======= =========== =========
</TABLE>
See accompanying notes to Consolidated Financial Statements
F-5
<PAGE>
ELECTRO-KINETIC SYSTEMS, INC.
September 30, 1999 AND 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Results of operations for interim periods are not
necessarily indicative of the operating results for a full year.
Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted in
accordance with rules and regulations of the Securities and Exchange Commission.
The financial statements in this report should be read in conjunction with the
financial statements and notes thereto included in the Form 10-KSB of
Electro-Kinetic Systems, Inc. (the "Company") for the year ended December 31,
1998.
Extraordinary Item - Cancellation of Indebtedness
The Company has recognized income on the write-off of certain outstanding
liabilities that prior to December 31, 1994, were recorded as expenses.
Contingent Liabilities
During the past years, the Company has entered into various agreements in
connection with actual and proposed transactions. The Company believes it has no
direct or contingent obligations relative to these matters that are not recorded
in the accompanying financial statements. The Company has no outstanding leases
or employment contracts, nor is it a party to or involved in any legal
proceeding as plaintiff or defendant.
A former officer and director of the Company who resigned in December 1995 has
presented certain claims of approximately $30,000 dating back to 1993 and 1994
which previously had not been presented and for which the Company denies all
liability.
Going Concern
The Company's financial position continues to reflect a significant shortage of
working capital and a negative book value. The Company believes that current
funds may be insufficient to continue to meet its obligations. While the Company
continues to pursue alternate courses of action, there can be no assurance that
it will be successful. The Company has a history of continuing losses and a
significant working capital deficit. There is doubt about the Company's ability
to continue as a going concern.
F-6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the financial
statements appearing elsewhere in this report.
General
Electro-Kinetic Systems, Inc. [EKS or the Company] was formed on April 24, 1972,
under the laws of the State of Pennsylvania. Its corporate office is now located
in Glen Gardner, New Jersey.
The Company ceased operations in radon testing in March 1995 and failed in its
subsequent efforts: environmental insurance (1995), magazine publishing (1996),
visual communication technology (1997), marketing of computer decision models
(1997 and 1998), and desk-top publishing and printing (1995-1998).
The Company's 50% owned unconsolidated affiliate, Printone Media Inc., ceased
operations in 1998. As a result of the acquisition of Israel Investment
Technologies, Inc. and two affiliates, in September 1995, the Company acquired
certain preliminary designs for developments of computer models in the fields of
medical compliance and electronic book publishing. The Company has been
unsuccessful in its efforts to exploit these developments.
Results of Operations
The consolidated financial statements include the accounts of Electro-Kinetic
Systems, Inc. and its wholly owned subsidiaries. The Company had no operating
income. The transactions with Advance Knowledge, Inc., described in full in the
Company's Annual Report on Form 10-KSB for the year 1998, have been finalized:
the receivable of $25,000 was collected and 300,000 shares of Advanced
Knowledge's common stock were distributed to shareholders of Electro-Kinetic
Systems, Inc., as previously voted by its Board of Directors and pursuant to the
agreement with Advanced Knowledge Inc. Such shares were considered to be
diminimus in value.
The Company has included in income: (i) the forgiveness of all interest due to
an officer in the amount of $14,700 through December 31, 1998 and $1,500 through
March 31, 1999; and (ii) the settlement of indebtedness below their recorded
liabilities in the amount of $23,000.
Liquidity and Capital Resources
Working capital deficit decreased by $39,161 from $147,072 as of December 31,
1998, to $107,911 as of September 30, 1999, as a result of net income and
settlement of liabilities for stock, net of deferred income. Shareholders'
negative equity decreased from $167,072 to $118,624 as of the same dates.
The Company's operating losses during the past years have been funded by the
sale of its Common Stock, by loans from shareholders, by the disposal of a
subsidiary, and by settling of indebtedness below their recorded amounts. For
the Company to become a viable entity, it must raise sufficient capital to fund
its operations. The Company is making continuing efforts to negotiate the
settlement of liabilities. The Company is also seeking merger opportunities, but
there can be no assurance of success in these endeavors.
1
<PAGE>
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
NONE
Item 2: Changes in Securities
NONE
Item 3: Defaults upon Senior Securities
NONE
Item 4: Submission of Matters to a Vote of Security Holders
NONE
Item 5: Other Information
NONE
Item 6: Exhibits and Reports of Form 8-K
NONE
2
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized:
ELECTRO-KINETIC SYSTEMS, INC.
Dated: October 28, 1999 By: /s/ Richard J. L. Herson
Richard J. L. Herson
Secretary, Treasurer
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following person(s) on behalf of
the Registrant and in the capacities indicated and on the dates indicated.
SIGNATURE CAPACITY DATED
/s/Julius Cherny President, Director October 25, 1999
Julius Cherny
/s/Richard J. L. Herson Secretary, Treasurer, October 28, 1999
Richard J. L. Herson Director
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2
<CURRENT-LIABILITIES> 121
<BONDS> 0
0
0
<COMMON> 3,441
<OTHER-SE> (3,560)
<TOTAL-LIABILITY-AND-EQUITY> 2
<SALES> 0
<TOTAL-REVENUES> 20
<CGS> 0
<TOTAL-COSTS> 11
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9
<INCOME-TAX> 0
<INCOME-CONTINUING> 9
<DISCONTINUED> 0
<EXTRAORDINARY> 39
<CHANGES> 0
<NET-INCOME> 48
<EPS-BASIC> .002
<EPS-DILUTED> .002
</TABLE>
